First Student, Inc. v. Nat'l Labor Relations Bd.

• Decision Date: 03 September 2019
• Docket Number: C/w 18-1153,No. 18-1091,18-1091
• Parties: FIRST STUDENT, INC., A Division of First Group America, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO/CLC, Local 9036, Intervenor
• Court: U.S. Court of Appeals — District of Columbia Circuit

935 F.3d 604

FIRST STUDENT, INC., A Division of First Group America, Petitioner

v.NATIONAL LABOR RELATIONS BOARD, Respondent

United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO/CLC, Local 9036, Intervenor

No. 18-1091

C/w 18-1153

United States Court of Appeals, District of Columbia Circuit.

Argued April 1, 2019

Decided September 3, 2019

David A. Kadela, Columbus, OH, argued the cause for petitioner, First Student, Inc. With him on the briefs was Erik Hult.

Angelo I. Amador, Robert S. Seigel, St. Louis, MO, Howard M. Bloom, Boston, MA, Michael T. Mortensen, Dallas, TX, and Collin O'Connor Udell, Hartford, CT, were on the brief for amicus curiae Restaurant Law Center in support of petitioner/cross-respondent.

David Casserly, Attorney, National Labor Relations Board, argued the cause for respondent, National Labor Relations Board. With him on the brief were Peter B. Robb, General Counsel, John W. Kyle, Deputy General Counsel, David Habenstreit, Assistant General Counsel, and Kira Dellinger Vol, Supervisory Attorney.

Maneesh Sharma argued the cause for intervenor Union. With him on the brief was Amanda M. Fisher.

Before: Rogers and Wilkins, Circuit Judges, and Silberman, Senior Circuit Judge.

Opinion concurring in part and dissenting in part filed by Senior Circuit Judge Silberman.

Rogers, Circuit Judge:

This case involves a successor employer and application of the "perfectly clear" successor doctrine stemming from NLRB v. Burns International Security Services, Inc. , 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972). First Student, Inc. is the largest provider of school transportation services in North America. Its bid to provide transportation services for Saginaw Public School District was first selected in October 2011, but the School District decided not to proceed because the academic year had already begun. First Student's bid was again selected in February 2012 and contract negotiations began. A few weeks later, First Student representatives met with School District transportation employees who were covered by a collective bargaining agreement and stated it would offer employment to existing employees, and expressed the desire to retain as many of them as possible. First Student now petitions for review of a Decision and Order of the National Labor Relations Board finding it was a "perfectly clear" successor employer and violated the National Labor Relations Act by changing the terms and conditions on which it would hire the incumbent employees without bargaining with their union. First Student contends that the Board applied the wrong legal standard, departed without justification from its precedent, and made factual findings regarding notice of the new terms and conditions that are not supported by substantial evidence. The Board has cross petitioned for enforcement of its Order. We deny First Student's petition and grant enforcement of the Board's Order in full.

I.

Congress enacted the National Labor Relations Act to "redress the perceived imbalance of economic power between labor and management ... by conferring certain affirmative rights on employees and by placing certain enumerated restrictions on the activities of employers." Am. Ship Bldg. Co. v. NLRB , 380 U.S. 300, 316, 85 S.Ct. 955, 13 L.Ed.2d 855 (1965). Section 7 of the Act provides that employees have certain rights, including the right "to bargain collectively through representatives of their own choosing." 29 U.S.C. § 157. Section 8(a)(1) provides that it "shall be an unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of" their Section 7 rights. Id. § 158(a)(1). Similarly, Section 8(a)(5) makes it "an unfair labor practice for an employer to refuse to bargain collectively with the representatives of his employees." Id. § 158(a)(5). Consequently, an employer violates Section 8(a)(1) and (5) of the Act if it changes terms and conditions of employment unilaterally, i.e., without giving employees an opportunity to bargain collectively through their union. Enter. Leasing Co. v. NLRB , 831 F.3d 534, 546 (D.C. Cir. 2016) (citing NLRB v. Katz , 369 U.S. 736, 743, 82 S.Ct. 1107, 8 L.Ed.2d 230 (1962) ).

The "perfectly clear" successor doctrine has its origins in the Supreme Court's decision in NLRB v. Burns International Security Services, Inc. , 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972). Burns concerned unionized security guards employed by the Wackenhut Corporation, which provided security for a Lockheed Aircraft Service facility from 1962 to 1967. Id. at 274, 92 S.Ct. 1571. In April 1967, the guards' union entered into a three-year collective bargaining agreement with Wackenhut. Id. at 275, 92 S.Ct. 1571. Shortly thereafter Lockheed decided not to renew its security contract with Wackenhut and awarded a new contract to Burns International Security Services. Id. Burns hired 27 of the guards formerly employed by Wackenhut and brought in 15 other guards to work at the facility. Id. The incumbent union "demanded that Burns recognize it as the bargaining representative of Burns' [guards] at Lockheed and that Burns honor the collective-bargaining agreement between it and Wackenhut," but Burns refused to do either. Id. at 275–76, 92 S.Ct. 1571.

The Board agreed with the union. Burns was a "successor employer" to Wackenhut because the business of providing security for Lockheed "remained essentially the same despite the change in ownership." William J. Burns Int'l Detective Agency, Inc. , 182 NLRB 348, 349 (1970). The incumbent union retained its position as representative of the security guards at the Lockheed facility because, the Board reasoned, the incumbent guards made up a majority of Burns' workforce and there was no reason to believe the change in management would affect the guards' selection of the union. Id. at 349–50 ; see 29 U.S.C. § 159(a).

The Supreme Court upheld the Board's determination that Burns, as a successor employer, had an obligation to recognize and bargain with the incumbent union. Burns , 406 U.S. at 277–81, 92 S.Ct. 1571 ; see Fall River Dyeing & Finishing Corp. v. NLRB , 482 U.S. 27, 43–44, 46–47, 107 S.Ct. 2225, 96 L.Ed.2d 22 (1987). Given that obligation, Burns' failure to recognize and bargain with the union violated Section 8(a)(1) and (5) of the Act.

Burns , 406 U.S. at 281, 92 S.Ct. 1571. But, the Court made clear, Burns' obligation to bargain with the union "did not mature" until it had "hired [a] full complement of employees"; only then did it become "evident" that the union "represent[ed] a majority of the employees in the unit." Id. at 295, 92 S.Ct. 1571. Because Burns had no duty to bargain with the union until it finished hiring, it was "free to set initial terms on which it [would] hire the employees of [its] predecessor." Id. at 294–95, 92 S.Ct. 1571. Critically for present purposes, the Court acknowledged that there are situations in which prior to hiring "it is perfectly clear that the new employer plans to retain all of the [predecessor's] employees." Id. Under those circumstances, the Court stated it is "appropriate to have [the successor] initially consult with the employees' bargaining representative before he fixes terms." Id. at 295, 92 S.Ct. 1571.

The Board first interpreted the Supreme Court's statement about "perfectly clear" successorship in Spruce Up Corp. , 209 NLRB 194 (1974), enforced , 529 F.2d 516 (4th Cir. 1975). Spruce Up Corporation employed a unionized workforce in 19 barbershops on a military base. Id. at 194. In early 1970, the base decided not to renew its contract with Spruce Up and awarded a new contract to Cicero Fowler. Id. When the incumbent union "learned that Fowler was the lowest bidder and likely to take over the operation of the Spruce Up barber shops, it requested Fowler to recognize and bargain with it." Id. Fowler told the union that he would have no duty to bargain until he began operations, that he intended to pay different rates of commission than Spruce Up had paid, and that he hoped to hire all incumbent barbers who were willing to work. Id. A few days before Fowler took over the barbershops, he sent letters to the incumbents inviting them to work for him on the basis of the new rates. Id.

The Board found that Fowler was not a "perfectly clear" successor to Spruce Up because he "made it clear from the outset that he intended to set his own initial terms, and that whether or not he would in fact retain the incumbent barbers would depend upon their willingness to accept those terms." Id. at 195 (emphasis added). The Board reasoned that Fowler's announcement of new terms created uncertainty about whether incumbents would elect to retain their jobs after the change in management. Id. As a result, it was not "perfectly clear" that Fowler "plan[ned] to retain all of" Spruce Up's former employees. Id. (quoting Burns , 406 U.S. at 294–95, 92 S.Ct. 1571 ). Spruce Up thus restricted the "perfectly clear" successor doctrine "to circumstances in which the new employer has either actively or, by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment," or "has failed to clearly announce its intent to establish a new set of conditions prior to inviting former employees to accept employment." Id.

Since then, the Board has refined the nature and scope of the "perfectly clear" successor doctrine. For one thing, the Board has long held that "perfectly clear" successor status may attach not only where a new employer "plans to retain all the [incumbent] employees" but also where it plans to hire "a lesser number but still enough to make it evident that the union's majority status will continue." Spitzer Akron, Inc. , 219 NLRB 20, 22 (1975) (first quoting Burns , 406 U.S. at 295, 92 S.Ct. 1571 ), enforced , 540 F.2d 841 (6th Cir. 1976) ; see, e.g. , Nexeo Solutions, LLC , 364 NLRB...